ABIST Co.,Ltd. Q1 FY2026 earnings call

Industry Context

• The automotive industry saw year-over-year growth in domestic new vehicle registrations last year despite impacts from U.S. tariff fluctuations. Global GX and DX competition is accelerating in R&D, with AI adoption growing rapidly in autonomous driving and development, and further increases in AI capability are expected.
• The human resources industry has steady demand driven by labor shortages, especially strong demand in system and software development. However, intensified talent acquisition competition across all industries has increased hiring difficulty and driven upward wage pressure.

Overall First Quarter 2026 September Fiscal Year Results

• Total revenue: 2.811 billion yen, +8.0% year-over-year
• Operating profit: 334 million yen, +8.3% year-over-year
• Ordinary profit: 335 million yen, +8.2% year-over-year
• Net income: 226 million yen, +31.1% year-over-year
• Growth was driven by increased operating headcount and unit price improvement in the core design development outsourcing business, delivering both top and bottom line growth year-over-year.

Key Strategic Initiatives

• Profitability Improvement Measures: Continue ongoing contract unit price improvement efforts, which have previously been supported by price adjustments aligned with domestic wage growth. The company has strengthened work via a company-wide managed working group to achieve unit price improvements more aligned with actual technical skill levels. Management regularly reviews unit prices in consideration of domestic price and wage inflation; strengthens sales capabilities to increase high-difficulty project orders, so that highly skilled engineers can earn unit prices matching their capabilities; expands training to increase the pool of engineers qualified for high-unit-price projects; leverages AI as a core capability (not just a supporting tool) for decision-making and core design processes to advance design sophistication and improve efficiency across the manufacturing industry.
• Talent Acquisition Initiatives: Use recruitment consultants to strengthen hiring capability, which resulted in hitting the 2025 new graduate hiring target. Implemented compensation improvements aligned with domestic wage growth in April 2025. Refined the education curriculum to split training by specialized field, enabling more practical training for inexperienced new hires, which has already delivered results such as enabling early assignment of some new graduate engineers and improved utilization. Significantly expanded new graduate technical training programs, adding more comprehensive coverage of specialized technical fields (mechanical and information technology) and human skills, with updated duration and content to better support skill growth before assignment, with the goal of building long-term customer trust.
• Leader Development Initiative (starting 2026 September Fiscal Year): Amid intensifying talent competition and growing labor mobility, the company has achieved stable hiring volumes and improved basic training for new hires, but needs to expand on-site acceptance capacity for new talent. The 2026 September Fiscal Year is positioned as a year of long-term human capital investment, with focused investment in developing frontline leaders and managers to support young engineers. Alongside compensation improvements, the company is currently building out structured skill maps and career maps for leader development.

AR/AI Solution Development

• Completed multiple digital development projects: automatic design checking tool (joint R&D with an automotive parts manufacturer targeting commercial launch), DiffAR (AR-based 3D shape difference detection program for iPad, patent applied for in August 2023, currently being refined for improved accuracy and proposed to automotive customers), 3D human model design using high-precision 3D scanning, automatic permit transcription systems, internal efficiency tools including automatic design cross-section creation and interference checking tools (already in internal use, with ongoing accuracy improvements to improve design quality and reduce costs via automation).

Abisto's core business is design and development outsourcing, split into two sub-segments: dispatch and contract engineering services:

1. Dispatch Business: Revenue increased 3.7% year-over-year, driven by early assignment of new graduate hires after training, strategic workforce reallocation, and unit price improvement. Revenue per engineer per month is 729,000 yen, an increase of 51,000 yen year-over-year.
2. Contract Business: Revenue increased 11.6% year-over-year, driven by progress in unit price negotiations and workforce growth. Revenue per engineer per month is 867,000 yen, an increase of 41,000 yen year-over-year. This segment maintains a high revenue contribution share of 59% of total company revenue.

Combined revenue per person per month for both segments is 804,000 yen, an increase of 49,000 yen year-over-year, and has maintained steady growth since the mid-term management plan was established. Excluding new graduate and potential hire engineers, core technical staff maintains a utilization rate above 95%.

• There are no changes to the previously revised November 2025 mid-term management plan targets for the 2027 September Fiscal Year: the targets remain 12.5 billion yen in total revenue and 1.3 billion yen in ordinary profit. The company continues to implement all planned initiatives steadily to hit these targets.
• The 2026 September Fiscal Year is focused on human capital investment for medium and long-term growth. The company began targeted human capital investment (compensation improvements and leader development) in October 2025 (the first half of the fiscal year) ahead of the scheduled April 2026 contract unit price revision.
• Profitability improvements from April 2026 and April 2027 unit price increases are expected to support achievement of the 2027 September Fiscal Year mid-term plan targets. After several years of flat profit since 2020, the company expects to return to a growth trajectory from the 21st fiscal year (2026 September Fiscal Year) onward via implementation of the current strategic initiatives.
• The company maintains its shareholder return policy: it prioritizes continuous and stable dividends, with a base rule to pay out at least 35% of net income as dividends each fiscal year, considering business expansion needs, dividend stability, financial position, and profit levels. It also maintains an existing shareholder benefit program to thank shareholders for their ongoing support.

• Existing profitability challenges: Outdated unit pricing that does not align with current technical skill levels and rising personnel costs from wage increases are pressuring margins. While unit price improvement is progressing, the company must continue persistent negotiations to further improve profitability.
• Intensified talent market challenges: Intense competition for technical talent across industries has increased hiring difficulty and driven up wage levels, creating pressure to secure sufficient skilled operating headcount, which directly impacts top-line revenue growth.
• Insufficient on-site leadership capacity: After expanding hiring and improving basic new hire training, the company faces a need to expand on-site acceptance capacity for new engineers, which requires more trained frontline leaders and managers to support young technical staff.

No question and answer section was included in the provided earnings call transcript.